What Brexit/Bremain Will Do to the Markets

Originally, I planned to post an article titled: “Difficult Markets Produce Fine Results – Part 2.” But I can see that the media are making noises about the coming Brexit or Bremain, just like they did when the issue of Grexit was hot.

A referendum is being held on Thursday, June 23, 2016, to decide whether Britain should leave or remain in the European Union.

Since the outcome of the referendum will impact the markets, it is worthwhile to know the nature of the impact and how exactly the markets would behave during and following the referendum.

Traders want to know what the market would do, whether it would go up or down or simply fluctuate wildly without a directional movement.

What would the markets do? I’ll tell you what the markets are supposed to do, and that’d be my opinion. Everybody is entitled to her/his opinion.

If you could recall my Annual Trading Forecasts for the year 2015, it was mentioned that USDCHF would experience a large pullback in January. That was exactly what happened.

What Would Happen to the Markets on June 23 and After
The Brexit/Bremain issues would affect mainly GBP pairs (Just like the SNB action of January 15, 2015, affected mainly CHF pairs). When I mention major GBP pairs, I mean GBPUSD, GBPJPY, GBPCAD, EURGBP, GBPAUD, GBPNZD and GBPCHF. These pairs are already trending strongly; but that is their normal behavior. Please check historical data.

Whether Britain chooses to remain in the European Union or leave, there would be strong movements in the markets. The movements would be stronger in case Britain chose to leave the EU. The currency market is like a rubber band: If it moves too far in one direction, it’d soon snap back. Accumulation and distribution territories are present to check strong trends.

Nevertheless… No matter what the outcome of the referendum is, there will be no unprecedented volatility in the markets.

In my recent markets forecasts, it has been mentioned that GBP pairs would experience strong volatility this month (plus NZD pairs). This is because GBP pairs usually move strongly in June while most other pairs experience low volatility. Bremain/Brexit issues are only a catalyst that will spur the usual strong movements on GBP pairs this June.

The market has a knack for going against people’s expectation. Events that people don’t anticipate are what cause surprise moves, not events that people anticipate. People didn’t anticipate the unprecedented CHF pairs volatility that occurred on January 15, 2015 and there were surprise consequences. Another instance of an unexpected event that caused surprise movements was the last major earthquake in Japan, in March 2011, which also caused nuclear fallout.

Grexit was hyped as something that might have a serious impact on the markets. What then happened? There was nothing significant or extraordinary, as far as the markets were concerned. Even there were far stronger movements in the first few months and the last few months of 2015, than when the Grexit issue was hot.

There wouldn’t be any unpredicted movements or volatility on GBP pairs (just like Grexit caused no special movements in the markets), save strong movements that are not more than anything that has been witnessed so far this year.

Whether Britain exits the union or remains in it, the markets will simply do what they’re known for. The markets will move, presenting good money-making opportunities for astute traders. The stronger the movement, the more money we make. After all, no money can be made in a market that doesn’t move well (unless you’re a scalper).

It’s good to open trades based on what the markets are doing, not based on what you think the markets would do. Yes, trending movements would develop further – a thing that good traders are prepared for.

Final Thoughts
Please, use risk control methods in your trading, so that adverse movements don’t have an adverse effect on your capital; while a favorable movement would have a satisfactory effect on your capital.

As ever, it’s good to risk very small per trade. When a position moves against you, you should be protected by a stop, having no worries, provided your stake is also small. When a position moves in your favor, you should make a decent profit.

However, certain traders might want to stay away from GBP pairs till the end of the month, if that’s what you prefer.

Once again, GBP pairs would trend strongly this month, but don’t expected any movements that would be stronger than what we’ve already witnessed this year, not matter the outcome of the referendum.

Do not expect any surprises when the public are anticipating them. Surprises come when the public don’t anticipate them.

This article is ended by the quote below:

“I‘ve seen a lot of aspiring traders over the years, trained some of the current leading coaches/mentors, worked with some amazing authors/hedge funds and seen a lot of people make this work. The ones that don’t make it work are often the ones that think too much and try to reinvent the wheel – or be / think they are – smarter than the markets. Stop trying to hit a hole in one and start treating this like a business and look to make an average profit on a consistent basis. This will work for you, whatever and however you decide to do it.” – Phil Newton (Source: Trade2win.com)

Copyright: Tallinex.com